Once you have decided to use a reverse mortgage to access your home equity, the next step is to choose a lender. While many reverse mortgage lenders are honest, there are some that employ a few questionable practices. To ensure your safety throughout the loan process, protect yourself by watching out for these three warning signs.
Confusing or Incomplete Documents
A reputable lender will never force their borrowers to sign vague, incomplete, or inaccurate documents. As a rule, consumers should pay careful attention to every document they endorse with their signature as signed documents can be legally binding. If a document contains terms or values different than what you have discussed with your lender, do not hesitate to speak up. Mortgage specialists understand the importance being careful and thorough. If you feel forced to sign confusing documentation, it might be time to begin questioning your lender’s intentions.
Claims That Are Too Good to Be True
As you are searching for reverse mortgage lenders, you might come across some attractive claims. To lure in potential borrowers, some lenders claim to offer federally-insured reverse mortgages that carry no closing costs or upfront mortgage insurance premiums. While these claims are certainly interesting, they are also far-fetched.
Currently, to get an HECM, or a reverse mortgage insured by FHA, borrowers are required to pay an upfront mortgage insurance premium. The size of this premium will depend on the loan product you choose. If you choose the HECM Standard, you will be charged an upfront premium equal to 2% of your claim. The HECM Saver carries a substantially lower upfront premium of 0.01%. While this fee can be financed into the loan, it cannot be eliminated. Reverse mortgage lenders who are willing to mislead borrowers on such basic matters should be avoided.
Discouraging Counseling or Other Third Party Advice
To qualify for a reverse mortgage, seniors must meet with a HUD-approved reverse mortgage counselor. Borrowers are also welcome to seek the advice of a family member or financial advisor anytime throughout the loan process. Getting a reverse mortgage is a big decision. Any lender who discourages their borrowers from asking questions or educating themselves should not be trusted.
